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Intel (NASDAQ: INTC) and SoftBank's (NASDAQOTH: SFTBY) ARM Holdings are often considered fierce rivals in the chipmaking industry. Intel's x86 chips dominate the PC and data center markets, but ARM's low-powered chip architectures -- used for designs by chipmakers like Qualcomm (NASDAQ: QCOM) and MediaTek -- have conquered the mobile market over the past decade.
That's why it was surprising when Intel recently announced a strategic partnership with ARM to manage Internet of Things (IoT) devices. Through the agreement, ARM's Pelion IoT management platform will use Intel's Secure Device Onboard specifications. This means that ARM will use common standards developed by Intel to manage IoT devices, network connections, and data transfers.
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How this partnership helps Intel and ARM
Intel still dominates the PC and data center CPU markets, and sells IoT chips for various industries. Intel's IoT revenue rose 22% year over year during the second quarter, fueled by strong demand in the retail and industrial sectors, accounting for 5% of the company's top line.
However, most IoT device makers still use ARM's low-powered chip architectures. ARM doesn't manufacture any chips of its own, so it reduces the hardware fragmentation among its partners with IoT cloud services like Pelion and embedded operating systems like Mbed OS.
ARM chipmakers repeatedly tried to challenge Intel in the data center market, but they failed to dent the chipmaker's 99% market share there. Qualcomm's big push into the data center market with its Centriq chips, for example, flopped earlier this year.
With Intel dominating data centers and ARM controlling the IoT market, it makes sense for the two rivals to remove the barriers between their data center and IoT chips. This helps Intel funnel more data to its data center chips -- which accounted for nearly a third of its revenue last quarter -- and helps secure ARM's IoT chips with better security standards. Security analysts have long argued that IoT chips make "dumb" objects smarter, but they often leave networks wide open to cyberattacks.
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ARM IoT Cloud Services chief Himagiri Mukkamala recently told Reuters that chipmakers will likely ship about 100 billion ARM-based IoT chips over the next four to five years -- which matches the total number of ARM chips shipped over the past 25 years. ARM also estimates that up to a trillion IoT devices could be installed worldwide over the next two decades.